RIM Beats Earnings Hopes but Skips Holidays

Written by: Antoine Gara12/20/12 - 4:22 PM EST

Tickers in this article:
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NEW YORK ( TheStreet) - Research In Motion (RIMM) reported fiscal 2013 third quarter earnings that beat diminished expectations, pushing shares higher in after-hours trading. However, as consumers brace to receive Apple(AALP) iPhones and iPads and similar Google(GOOG) -Android powered mobile devices this holiday season, Research In Motion enters the New Year with no flashy new products.

The BlackBerry maker and smartphone pioneer reported revenue of $2.7 billion and a net loss of 22 cents a share. That beat Wall Street expectations of $2.6 billion in revenue or an adjusted loss of 35 cents a share, according to analyst estimates compiled by Bloomberg.

Compared with this time last year, Research In Motion's earnings have turned from a $265 million profit to a $114 million loss. Meanwhile, revenue has fallen by roughly 50% to $2.7 billion from $5.2 billion a year ago. Crucially, cash at the handset maker came in at $2.9 billion, an increase of $600 million in the quarter. Research In Motion also posted $950 million in cash from operations.

Wells Fargo analyst Jennifer Fritzsche forecast, in an earnings preview, that the company would ship 7.5 million handsets -- slightly above consensus of 7.2 million shipments - and see its gross margins fall to 27%, slightly below year ago levels. Meanwhile, Fritzsche forecast RIM's average selling price per handset would fall to $220, slightly above consensus of $215 a handset, but below year ago levels of $229.

In third quarter earnings Research In Motion sold far fewer handsets than expected but saw prices stabilize. RIM shipped 6.9 million BlackBerry smartphones and roughly 255,000 BlackBerry PlayBook tablets, according to a press release.

While the earnings give crucial insight into Research In Motion's financial picture headed into the New Year, they are still unlikely to change the longer term outlook of the struggling handset maker. More importantly, analysts and investors await details on the launch of BlackBerry 10, Research In Motion's new operating system and a corresponding set of smartphone and tablet devices.

That launch, slated for late January, may provide more insight than third quarter earnings on whether RIM can reignite competition against Apple(AAPL) and Google(GOOG) -powered devices in the ultracompetitive handset and tablet markets, or whether its best option resides in a takeover or asset sale.

That's the perspective of Donald Yacktman, the head of Yacktman Asset Management , a mutual fund investor that is Research In Motion's fifth largest shareholder, according to Securities and Exchange Commission filings compiled by Bloomberg.

In a telephone interview prior to RIM's earnings, Yacktman said he wasn't expecting much out of the company's third quarter earnings. "I wouldn't expect a lot. I think they are burning a lot of cash right now," Yacktman said.